Wednesday, January 27, 2010

Party's over for the public sector.

It's open season on 'pen-pushers'. The Chancellor, Alistair Darling, isnow calling, not just for a freeze, but for actual reductions in bureaucrats' pay. The Scottish government has launched an assault on bonuses for highly-paid public quangocrats. The Tories want pay cuts across the board. Everyone says the end is nigh for public spending and that with a £200bn deficit, cuts are inevitable – though politicians can never quite get round to saying where.

It's so over for the public sector, it seems. But before we go on, a word of support of the much-maligned public sector worker. They aren't all time-serving pen pushers with shiny bottoms. The state employs some of the most valuable and productive workers in society - doctors, nurses, teachers, social workers, soldiers, judges, prison officers, scientists, researchers. Without them, Britain has no future – economically, educationally, socially. Moreover, had it not been for the public sector keeping the economy going, the economic recession might well have plunged into a depression. In Scotland, where 60% of GDP is generated by the public sector, there would have been economic chaos.

Ok - party political broadcast over, because from here on it gets nasty. I'm afraid I have to end the habit of a lifetime and agree with the Chancellor. Quite simply: it's all gone too far. It's not just all those hospital administrators on £200,000 a year, or the 20% bonuses being paid to quango bosses. Public sector workers as a class have privileges which are no longer justified or affordable. And I'm afraid very few of them realise it. Most public sector workers still live in a world where jobs are secure, salaries increase every year, the working week is getting shorter, early retirement is the norm and final salary pensions are guaranteed whatever the state of the economy. That world has gone.

And,yes, I know this sounds like the Daily Mail. I know lots of people in the public sector, mostly in education, politics, the civil service. I have great respect for many of them, but they just don't get it. They think everyone in the private sector is paid better than they are, which isn't true. Whisper it, but even many teachers and nurses are rather comfortably off now.

Take Pete Powerpoint, a bog standard college lecturer on £43,000. In his fifties, with house paid up, he's looking for early retirement. He thinks he deserves his index-linked pension after a lifetime of service. But the cost of providing it will be around £1.3 million – and it won't be paid by him it will be paid by the rest of us. The lifestyles, pensions and salaries of Britain's 6 million state workers are paid for out of the taxes paid by the other 15 milllion workers, and most of them are really struggling. .

The fundamental question is this: How can you ask one group of workers, whose pay is being slashed and either have no pension at all or have lost half of it in the stock market, to pay the salary increases and index linked pensions of another group of workers who just happen to work for the state? The unfunded burden of public sector pensions alone amounts to nearly a £1 trillion. These obligations are enshrined in law - so public services are going to be cut to shreds in order to keep paying the Pete Powerpoints. And taxes are going to have to go up. Already there are councils in Scotland where nearly all the council tax receipts go to pay the pensions of public sector workers.

Now, in the old days, the deal was that people in public service got job security and a small pension as a reward for poor pay – but those days are gone. Wages and salaries in the public sector are much higher than in the private sector, both in annual terms and hourly wages - and that's not taking into account pension benefits, which are equivalent to 19% in additional salary for every public sector worker. Defenders of public sector privilege argue that the pay differential is because many of the poorly-paid public sector jobs, like hospital cleaners, janitors etc.. have been outsourced to the private sector. But I'm afraid this only underlines the point I am trying to make: that it is increasingly impoverished workers in the private sector who are being asked to pay the exploding pensions and salaries of the public sector.

People also say that public service workers should get the rate for the job, if we want the best people. But that is a banker's argument, and it is as specious in council offices as it is in RBS. Our civil service has been infected by a bonus culture, borrowed from the City, which is creating ludicrous disparities between public employees and the ordinary people who pay their wages. And the bureaucracy is mind numbing.

Take the NHS, where the number of administrators has doubled since 1997. In that period, the number of beds has actually fallen, from 12 beds per manager to 5 beds. Since 1997 NHS chief executives have seen their average earnings increase by 98% compared to the 50% increase across the public sector as a whole. No one is a greater defender of the NHS than I am – but this is simply insane. Senior health board executives all on six figure salaries plus bonus are a luxury we cannot afford.

Overall, public sector pay increased by 3.8% last year when private sector pay went down by 0.1%. That may not seem like much, but it is a relativity of epic significance. Private sector pay is going down faster than at any time since the 1950s as poorly unionised work-forces accept cuts to keep their jobs. 60% of employers say they are going to cut pay further this year. In free-for-all Britain, workplaces are governed by fear. These workers have no security and no future pensions to look forward to. Only one worker in five is saving enough for a proper pension.

But hang on, says Pete Powerpoint, why should the public sector have to share the misery? Depriving state employees of their security and pensions won't stop people being exploited? No, but the hard political reality is that the shrinking cohort of private sector tax payers are simply unable to pay the cost out of their diminishing salaries. The writing is on the wall. Get that early retirement deal quick Pete - while you still can.

I must be imagining all those years where I got told that "the Public sector has to set an example" and that I must watch my wage fall in regards to inflation, in some years significantly.

When will I be getting a bonus like you say?

And if my working hours are so short why am I losing flexi-time because I build it up covering for posts that are not filled and I have to do the long hours and can't get time off. Why is it I don't get to use my annual leave for the same reason.

why is it that the private sector rate for my job is 50% higher than I get paid?

I know noone loves us, but why do lazy journalists like to keep the dislike stoked?

It's a fair and balanced piece Iain. There are public sector workers who are utterly invaluable and who deserve every penny they get... and there are some, and I know them, who brag about how little they do, and how they are coasting in for retirement... in their early 50s.

There are lazy jobsworths who are as secure as... well as a secure thing, and of course there are hard working people without whom the country would come to a standstill, and I know some of them too.

But the party is over. As you say, who is going to pay for these salaries and pensions for 6 million people? The truth is the country hasn't got that much money. The banks have it all, and they are divvying it up amongst their directors and executives as we write, so, something will have to give.

We could reduce retirement pensions of course, and make everyone on the dole or the sick work.... except, of course, there are no jobs and there will be even fewer in the near future...

We could sack half the public sector workers and let the remaining ones have their full salaries, but then they’d all moan about how much they have to do... and there would be even more unemployed.

Nope, like you, I never r thought I’d agree with the idiot chancellor, but he’s more of less got it.

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About Me

Iain Macwhirter is the award-winning political columnist for the Herald and Sunday Herald. He has been a political broadcaster for over 20 years, in Westminster and Holyrood, and is former Rector of Edinburgh University.